Ester Industries Limited (NSE: ESTER) Q1 2026 Earnings Call dated Aug. 01, 2025
Corporate Participants:
Unidentified Speaker
Amit Sharma — Investor Relations
Sourabh Agarwal — Chief Financial Officer
Vaibhav Jha — Deputy Chief Executive Officer
Pradeep Kumar Rustagi — Executive Director- Corporate Affairs
Analysts:
Unidentified Participant
Aman Kumar Sonthalia — Analyst
Saransh Gupta — Analyst
Vidip Shah — Analyst
Urmish Shah — Analyst
Chandra Shekhar Randev — Analyst
Saket Kapoor — Analyst
Presentation:
operator
Ladies and gentlemen. Good day and welcome to Q1FY26 earnings conference call of H Industries Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Amit Sharma from AD Factors PR Investor Relations team. Thank you. And over to you sir.
Amit Sharma — Investor Relations
Thank you Avirath. Good evening everybody and a very warm welcome to you all. Thank you everyone for participating in this earnings call of Esther Industries Limited for the quarter ended June 30th, 2025. Before we begin, please note that this conference call may contain forward looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. The statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. On the call with us we have Mr. Vaibhav Jha, Deputy CEO, Mr.
Pradeep Kumar Ristagi, Executive Director Corporate affairs and Mr. Saurabh Agrawal, CFO. The management will take us through the operational and financial performance for the quarter gone by following which we will open the forum for Q and A. I now request Mr. Vaibhav Jha to take us through the company’s performance. Thank you. And over to you sir.
Vaibhav Jha — Deputy Chief Executive Officer
Thank you Amit and thank you everyone for joining us today. I will briefly talk about the key business developments post which Sourabh will walk you through our financial performance. Before we delve into the performance highlight for the quarter I would like to begin with an important update on our brand identity. On the 11th of July we unveiled a refreshed company logo which is aligned with our long term strategic focus and a change that goes beyond just visual aesthetics. Our new identity is a reflection of our evolving mindset. Precise, purposeful and firmly future focused, it represents our commitment to innovation, sustainability and designing high performance materials for enduring tomorrow.
It is also a reflection of sharper and quick response to every dynamic to ever dynamic nature of industries that we serve. This transformation marks a significant step in how we present ourselves to various stakeholders and it sets the tone for the next phase of our journey. Coming to the performance of Q1FY26 we are encouraged by the continued progress across both our key business segments on consolidated basis. During the quarter under review revenue grew by a healthy 19% and EBITDA margin improved by 240bps on year. On year basis the actual EBITDA earned stood at 8.35%. EBITDA margin would have been 11.8% but for the adverse impact of the exchange fluctuation and MTM losses on FCL or derivative availed by Esther Filmtech reflecting healthy demand trends and strong execution of stock adopted strategy earnings before depreciation and taxes or cash profit.
In other words, which excludes the losses on the account of MTM of these foreign derivatives and also excludes the reinstatement of FC loans. Yeah. So just to restate the cash profits which is EBDT has improved from a negative of 1.46 crores in Q1FY25 to positive 25.4 crores in Q1FY26 showing improvement in the operating performance. A standout performance this quarter has been the remarkable increase in the recycled pet revenue which surged from just 0.5 crores in Quarter 1 FY25 to 14 crores during the quarter under review driven by the significant volume expansion. Before I delve on the performance of each business segment, let me inform you that from this quarter onwards, following an operational realignment and revised approach for performance evaluation and resource allocation, recycled pack revenue will be reported under the polyester film segment instead of the specialty polymer segment.
This change reflects our business structure and the increasing relevance of sustainable materials within the core films operations. Starting with polyester films business on consolidated basis, the capacity utilization improved to 82% as compared to 64% during Q1 FY25. Polyster film delivered a robust performance by recording sales of 21,531 metric tonnes reflecting a growth of 22.57% over Q1 FY25. An improved demand supply scenario and higher proportion of value added and specialty products resulted in revenue announcing from 228.67 crores to rupees 276.07 crores. An increase of 20.7%. Concerted efforts enabled us to enhance share of value added products to 24% in total segmental volume.
The upward trajectory is clearly evident from the growth of 37% in volume of VAS products achieved on year on year basis. The increasing shift from the commodity to specialty has contributed meaningfully to profitability and differentiation. The main factors causing such growth were improved demand, supply balance and higher volume of VAS products. Implementation of PWMR rules with effects from 1st April 2025 has started to enhance demand for differentiated offering of BOPET films with varied PCR content levels. We are proud to be at the forefront in exploiting the opportunity offered in this regard. The significant growth of ARPET sales in volumetric terms resulted in revenue growing remarkably.
This highlights the growing traction in sustainable product categories. We are pleased to report that the project for installing additional capacity of 20,000 tons per annum in Hyderabad is progressing as per schedule and commencement of commercial production is expected by September 2025. Now turning to specialty polymers business, we recorded a volume growth of 4% year on year with total sales reaching 954 metric tons in Q1 FY26. Quarter ended June 2024 had an exceptionally favorable product mix that resulted in ebit margin of 43%. Quarter ended June 2025 is more aligned to usual product mix and ebit margin of 30 to 35%.
This explains why we witnessed a downward trend in EBIT margin on year on year basis. We continue to focus we continue to focus on optimizing product mix and driving innovation while targeting growth in volume with sustained margins. We are confident that business will remain will maintain its growth momentum in the coming quarters and years supported by a promising product line and human capital to pursue aggressive and focused R and D activities and implementing chosen marketing strategy. Moving to Esther Filmtech Ltd. The business delivered a notable improvement this quarter both on a year on year and sequential basis.
Capacity utilization stood at 72% as compared to 49% in Q1 FY25 highlighting operational ramp up and improved production efficiency. On quarterly basis, volume grew by 23% while revenue increased by 16%. In value terms though the margin improved, the realization was lower due to pass through business model for raw material prices. Production efficiency and higher operating leverage coupled with a better product mix and margin environment led to improved profitability. Excluding the adverse impact of the foreign currency fluctuations. EBITDA for the quarter Q1FY26 would have been positive 9.26 crores with a healthy EBITDA margin of 9.8% but for the adverse impact of exchange fluctuation and MTM losses on FCL or derivatives availed by the company, earnings before depreciation and taxes or cash profit excluding losses on account of MTM and reinstatement of FC loans improved from a negative of 10.54 crores in Quarter 1 FY25 to positive 1.8 crores in Q1 FY26.
As regards to our 5050 joint venture with Loop Industries, we are pleased to report that the execution of our joint venture plans is advancing according to the established timelines. We are diligently pursuing various activities related to implementation of the project. We remain enthusiastic about the transformational potential of this initiative in the circular economy space. In conclusion, Q1FY26 has been a strong and encouraging quarter for the company marked by improved capacity utilization, volume led growth and higher volume of VAS products. Our focused business strategy, concerted efforts in product innovation, strong product pipeline and expanding global footprint positions us well to deliver consistent and sustainable growth across both business segments.
We remain committed to creating long term value for all stakeholders. That concludes my opening remarks. I now hand over the floor to Sourav. Thank you to walk you through our financial performance. Over to you Saurav.
Sourabh Agarwal — Chief Financial Officer
Thank you Vaibhav and good day everyone. Thank you for joining us on our quarter one FY26 earnings call. Let me quickly walk you through the financial performance post which we can commence the Q and A session. I would like to start with the standard on financial performance in quarter one FY26. The company reported a total income of 284 crores to 284.97 crores representing a 16.9% growth on year. On year basis, EBITDA for the quarter stood at 31.94 crore making an impressive 88.77% increase over quarter one FY25 with the EBITDA margin expanding by 427 basis points to 11.21%.
This significant improvement reflects the benefit of a higher capacity utilization, higher proportion of VAS products, better product mix and cost optimization efforts. The company also delivered a strong bottom line recovery reporting a profit after tax of rupees 9.64 crore compared to a loss after tax of rupees 2.04 crore during quarter one FY25 packed margin stood at 3.38%. For Ester Frimetech which is a subsidiary, we reported a robust 22.93% year on year growth in sales volumes reaching 7,992 tonnes from 6,501 tonnes in Q1 FY25. This was accompanied by a 16.32% increase in total income which stood at 94.13 crore compared to 80.90 crore in the corresponding quarter last year reflecting improvement in operational scale and stronger market traction.
However, EBITDA for the quarter stood at negative of 2.69 crore primarily impacted by exchange rate fluctuations and mark to market losses on foreign currency loans derivatives availed by Aster Flimtech. At a net level the loss after tax stood at rupees 16.54 crore 16.5 crores. EBITDA would have been rupees 9.23 crore with a healthy beta margin of 9.8% but for adverse impact of foreign exchange fluctuation and mark to market loss on foreign currency loans and derivatives availed by the company. Earnings before depreciation in taxes excluding losses on account of mark to market and reinstatement of foreign currency loans improved from a negative of Rupees 10.54 crores in Quarter 1 FY25 to Rupees 1.8 crores in Quarter 1 FY26.
This reflects the underlying strength in operations driven by improved production efficiency, better operating leverage and a favorable pricing and margin environment. While the reported profitability has been impacted by foreign cancellated factors, the core business performance continues to move in the right direction. On a consolidated basis we recorded a total income of Rupees 346.85 crore making a strong 18.64% y on y growth compared to Rupees 292.0 crores in Quarter 1 FY25. This was driven by healthy volume growth and improved revenue contribution from both film and specialty polymer segments. EBITDA stood at rupees 28.96 crore reporting a 66.53% increase over the previous year with EBITDA margin expanding to 8.35% up by 240 basis point.
EBITDA for the quarter quarter 1 FY26 would have been rupees 40.88 crore but for the adverse impact of foreign exchange fluctuation and MTM loss on foreign currency loans and derivatives availed by Asta Flemtech Ltd. Earning before depreciation in taxes excluding loss on account of mark to market and reinstatement of foreign currency loans improved from a negative of Rupees 1.46 crores in Quarter 1 FY25 to a positive of Rupees 25.4 crores in Quarter 1 FY26. This improvement reflects stronger operational efficiency, a better product mix and a higher capacity utilization across business verticals. Both EIL and Astra FinTech have been absolutely regular with repayment of term loans as per schedule basis.
The budgeted improvement in profitability coupled with free cash and bank balance in hand, we are absolutely confident of adhering to the repayment schedule. On the working capital front, both the companies have adequate limits to sustain budgeted enhanced operations. Overall, the company has demonstrated resilient operational progress with enhanced margins and narrowed net losses, setting the stage for improved profitability in the coming quarters. This concludes our opening remarks. We can now commence the Q and A session. Thank you.
Vaibhav Jha — Deputy Chief Executive Officer
I would like to thank.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Aman Kumar Santalia from AK Securities. Please go ahead.
Aman Kumar Sonthalia
Yeah, good afternoon. My question is that the puppet industry is settled with very high capacity and over surprise issues. And so when we can see that this overcapacity gets over.
Vaibhav Jha
So you are right, there is over capacity. But what we have been seeing in a sustained way is the reduction in surplus capacity. Right now what we see is that the operating rates of the Indian capacity is in the range of 80% which is quite, quite healthy. And the growth in Bulpit segment is likely to be nearing double digit number of 10% year on year. Which means that the domestic industry itself is, I mean the domestic demand itself is going to grow Almost, let’s say 80kt, 80 to 85,000 tons per year. So what we are seeing is that this coupled with the fact that there is sustained increase in exports from India to various geographies, at least 90 to 100kt of demand is going to be added for the Indian capacity year on year.
So right now the total demand that Indian industry is catering to is in the range of 1 to 1.1 million and the capacity is 1.35 million tons. So the surplus capacity is hardly 250,000 tonnes and in two to three years time this would be completely sold out. Right. And so we see that despite some new capacities which have been announced and which would start coming in sometime from mid of next year, we still See that the operating rate is going to be reasonably good and that itself will give some sustainability to the margins. One of the challenges which we have been seeing is the imports which have been coming at quite low rates from the overseas geographies.
Those are something that are limiting the upside on the margins. But we are working through various channels to ensure that we are able to balance the pressure of the imports with our margin resilience. So what we have been able to demonstrate in last six to nine months is that we have found that sort of margin which is far better than what we had seen maybe a year back, mainly due to the operating rates improving. And we’ll continue to take steps to make sure that the margins are sustained and we keep a healthy profitability in the industry.
Aman Kumar Sonthalia
Sir, in the month of May, I think there was a fire in one of the Pierce plant. So after that there was a significant jump in the both Puppet and Bopp prices. And after that I think a lot of import has happened and the price increase which was taken place during the month of May and June has again the price is back to square one. I think it’s again come back to the old level. So I think it will make. Do you think that upside is very limited because whenever there is upside, import will happen and it is very difficult to manage that.
Vaibhav Jha
Yes, so you are right, that, that’s what I meant when I said that the balance between our margins and the import prices. Right. So we are maintaining that balance and we are also trying to take some steps with the government to make sure that, you know, we avoid unnecessary imports which are coming at artificially low prices. So, so we are taking steps in that direction and we are hopeful that maybe within a quarter or two quarter we will have some positive development which will help us stem the flow of low priced imports.
Pradeep Kumar Rustagi
So we are in the process of evaluating the various trade measures and trade remedies that are available to the domestic industry. And once we have evaluated and exposed those remedies, there is a possibility that we would be able to restrict the import at cheaper rates.
Aman Kumar Sonthalia
Okay. Okay, sir. And
Vaibhav Jha
let me also add to this that you know, our core strategy is to increase the share of specialty films, right. Which is almost now 25% of our sales. And the reason for that is that we get out of this impact of commodity markets. So that is another thing which we are focusing on to get less impact from these kind of imports.
Aman Kumar Sonthalia
What is the current spread at the moment and what it was in the previous quarter?
Vaibhav Jha
So the previous quarter it was in the range of if you take the average, it was in the range of 27, 28 rupees. And this quarter we expect it on an average to remain in the similar range.
Aman Kumar Sonthalia
Same of last words.
Vaibhav Jha
Yeah, we talk about these margins. Please remember we are talking about the commodity part of our business.
Pradeep Kumar Rustagi
So basically
Aman Kumar Sonthalia
this is the commodity part.
Pradeep Kumar Rustagi
Commodity. Yeah,
Aman Kumar Sonthalia
yeah, yeah. And sir, whether there are any significant capacity coming overseas? Also.
Vaibhav Jha
Overseas there is further capacity growth. Is there? See, there are, you know, let’s say, you know, more than 50, 60 plants which are there in China itself. Right. So it’s difficult to keep track of whatever new capacities are coming in each country. Right. But what we have seen as a trend is that the addition of new capacities which had been tremendous in, in the years of 22, 23 in China, that has slowed down and in fact we are seeing that there has been some cancellations on the orders which were already placed. So there is a complete reversal of trend of capacity addition globally.
Amit Sharma
Okay. And sir, what about this Arpit? What type of potential we are seeing and how much margin it can be we will achieve from Arpit?
Vaibhav Jha
See, Arpit for us is integral to our film business. What has happened is that because of various sustainability regulations in India and also in some international markets there is having an increased demand of, you know, films with recycled content. So the recycled PET that we manufacture is mainly geared to be used as a raw material in manufacturing of this, these sustainable films. And what we are seeing is that there is an increased demand for these recycled bopet in India. So the margins for the PCR films with recycled content is much higher than the commodity films.
And so the true margin that we will get out of the Arpit investment should actually be the Arpit plus the margins that we get in the film. Right. So that’s one part of it. The second part of it is that we will definitely have some surplus capacity as the demand for sustainable films keeps ramping up. So we intend to sell this outside at reasonable margins in line with the markets are. So this is more or less a commodity product if sold outside like a recycled PET chip. So that’s a temporary stopgap. The intention for investing in this capacity was to have really good quality of recycled PET chips as a feedstock for our PCR films because we want to be able to make the best quality recycled films, which is quite a difficult endeavor.
Aman Kumar Sonthalia
So sir, it is a textile.
operator
Mr. Aman, may I request you to turn to the question queue for a follow up question?
Aman Kumar Sonthalia
Okay,
operator
thank you. The next question is from the line of Saranj Gupta from SAN Investments. Please go ahead.
Saransh Gupta
Thank you for the opportunity, sir. Am I audible?
Vaibhav Jha
Yeah.
Saransh Gupta
So I have a couple of questions. So it goes as key sir, as we can see that in our specialty polymers, 85 to 88% of our contribution is from two products that is innovative, CBT and MBU3. So going ahead, how do we see this moving and what is the potential of other products?
Vaibhav Jha
So. Right now I think IQ pbt, we are seeing a very strong demand this year and we expect that with the certain innovations which are in the pipeline in this product, we expect to see a continued trend of increased demand for this product year on year. Now coming to the second product which is MB03, again over here we are in a very good position in terms of our placement in the market. We are seeing continued increase in the demand from international markets as we see that sulfonated nylon demand is increasing day by day because now nylon has become very cheap compared to alternative products and therefore our product becomes a very much commercially viable compared to the other competing products like ptt.
So we expect that again over here we should see very good pipeline of growth. One of the new things that we have started doing is promoting this material into new geographies including India. And these products take anywhere between nine to 12 months to mature and start showing some volume build up. So the visibility that we have is that we should start seeing new customer addition with reasonable quantities in next six to nine months. And then, you know, once they are in with some smaller volumes, they keep on continuing to grow as their confidence in our product increases and as they start finding end markets for their products.
So overall we are quite bullish on the growth trend for IQ PBT and MV03. Apart from these two products, we have a few other products where the margins are reasonably good. Not as high as IQ PBT or MB03, but it helps us to fill up our capacity which we have with us. So we have also taken a call to start promoting those products in order to build some cash flow in the business. Again, as I said that these products have a long pipeline. I’m sorry, long maturity period of 9 to 12 months. Again over here we see that in next 6 to 9 months we should start seeing addition of new products and new customers and volume should start increasing.
So overall in specialty polymer space we have reasonably good confidence to grow it in double digits over next three to four years.
Saransh Gupta
That’s, that’s very good, sir. My next question is that how much of our revenue is contributed by Exports as of Q1 FY26.
Pradeep Kumar Rustagi
Close to 35% has come from the exports because especially polymer is majorly exported and then certain sizable portion of polyester film is also exported. So close to 35% of our revenue for the quarter has come from the exports.
Saransh Gupta
And what all geographies are we exporting to?
Pradeep Kumar Rustagi
Currently. We export to almost all the continents. We have presence in 50 countries. It doesn’t mean that every product will be sold to all the 50 countries in a month, but in a year our penetration is more than 50 countries across all continents.
Saransh Gupta
Sir, as we know that Trump has said that there will be 25% tariff on Indian goods. So how do we see that coming into our numbers? Like will it be shared with the customer also? And if what then what will be the impact on the margin for specialty polymers?
Vaibhav Jha
So it’s a very interesting question. So let me give you a overview of our thinking. So first of all this is an evolving situation and right now it’s not very clear to us what is going to be the long term tariff implication. Right now it’s 25%. But then there is also a talk of a 10% penalty. In fact the penalty is not at all clear, though Some reports at 10% we are not very clear. Then there is also this talk of the negotiations continuing with U.S. delegation visiting. So we believe this is an evolving situation and what we see now may not perceive and there is also very bright chance that and our belief that the tariffs are going to be more in line with what we have seen with others in the range of 15 to 20%.
But really no one knows to be honest. But having said that, and if you look at the current clarity on 25%, we believe that the important thing is not to look at the absolute quantum, but the relative position of Indian tariffs with respect to others. So other competitors for us in Asia they are placed in and around 19 20%. So it’s a 5 to 6% disadvantage as of now, which is is not very large as it appears when we think about 25%. Also our revenue exposure to US is about 10% of our total revenue. So we are exposed, but it is a limited exposure for us.
And also what we sell into us are all specialty fins products or specialty polymers where we have a very strong price resilience. So when the tariff moved up from 6% 6.5% to 16.5%, we were able to pass on the entire tariff load to our customers because of this price resilience in the nature of product we sell. And right now the we believe that because of this price resilience, our impact we will have to assess on case by case basis and we expect the impact to be minimal to moderate at best. So we don’t see a big impact on our profitability because of this movement.
Saransh Gupta
That’s nice. So sir, factoring everything in and like we are looking out for other geographies as well for our specialty polymer products and factoring in that other products like MBO 7 will also start contributing to our revenue as just as like innovative CBT and MBO3 are doing right now. So what can we see as the potential revenue from specialty polymers and by when can we achieve it?
Vaibhav Jha
So see at this point in time it’s very difficult to give the exact number in terms of that we would you know, hit. But like I said earlier that our effort is to grow it in healthy two digit percentage points, double digit percentage points year on year for next three to four years. So let’s say, you know, we have been projecting 20 to 25% growth so we would stick to that kind of growth numbers in this business.
Saransh Gupta
Okay, that’s all sir, thank you so much. I will join back the Q.
Vaibhav Jha
Thank you.
operator
Thank you. The next question is from the line of Vidit Shah, an individual investor. Please go ahead.
Vidip Shah
Yeah, thanks for the opportunity. Am I audible?
Vaibhav Jha
Yes.
Vidip Shah
So my question is regarding the Esther film tech. So how long until that can deliver sustained pat level profits given the utilization and normalized ebitda?
Vaibhav Jha
So, so see the thing with EFTL is that we are getting first of all badly hit as we saw in this quarter due to. Right. So that is something which you know, really we believe is, you know was a very high impact in last two quarters I think. And this impact should normalize now going forward. Right. Because it cannot be sustained and the currency movements move in jerks and then they tend to stabilize. So we believe that the stabilization phases here, so at least that impact will normalize in the future quarters. Next thing what we are trying to do is the scale up of the volumes there and increasing the specialty part of the sales from eftl.
And we believe that in next couple of quarters we should be in a position where we can start giving sustained positive. I would also like to reinforce that even this time if you look at the cash profits after removing the impact of mtm, we have seen a significant improvement in cash profit by almost 5 to 6 crores from a negative 4, 4.55 crores to positive EBDT of 1.5 crores roundabout. So this itself shows that we are moving in a very steady manner towards profitability. And so we are doing well. And if this trend continues, couple of quarters we see ourselves being firmly in the fat positive zone.
Pradeep Kumar Rustagi
So there are 3, 4 positives as far as Hyderabad operations as a fintech operations are concerned. Number one, there is going to be consistent improvement in the capacity utilization which we have seen in the quarter. One also number two, when the recycling extruder is commissioned it will make us make more money from the polyester film with PCR content. And third, we are increasing the proportion of the value added products in the film segment in Hyderabad. So all these three factors, better capacity utilization, art, PET getting commissioned and the value added films increasing in quantitative terms this is going to do good to the bottom line of Astropiltech.
Vidip Shah
Okay sir, any guidance why RPAT commissioning got delayed?
Pradeep Kumar Rustagi
We were targeting 31 August, now it is getting commissioned by 15 September. So it’s this actually.
Vidip Shah
Understood. Understood. Thank you so much.
Vaibhav Jha
Thank you.
operator
Thank you. The next question is from the line of Urmesha from moneyvices. Please go ahead.
Urmish Shah
Yeah, thank you for the opportunity. I have a couple of questions. One question is based on the question of previous participant on the tariffs only. So if the tariffs continue so and any fluctuation in the Forex, how are we looking to safeguard us from that? Hello.
Vaibhav Jha
Due to tariff situation worsening.
Urmish Shah
Yeah. Yes, yes, yes.
Sourabh Agarwal
So if you see the trajectory in the last two to three months of both euro as well. So we basically export in both euro currency as well as dollar currency. There is an appreciation in both the currencies against rupees. Right
Urmish Shah
, Right.
Sourabh Agarwal
So as FX is concerned we don’t see any major challenge as such. And as as the as and going forward also the we expect that the currency will depreciate further though we don’t see a significant drop reduction in the INR Euro INR dollar as well as INR Euro. And we believe that in the next two to three months or up to December the currency will remain in this range bond manner.
Vaibhav Jha
To add to what Sourav was saying, our entire sales is dollar denominated. Even the domestic sale is dollar denominated because it is mainly marked to the import landed prices. Right. So that way you know we expect that we should be able to address the foreign exchange fluctuations in a large way.
Urmish Shah
Okay, okay, that helps. And the second question is on a Hyderabad capacity. So once the capacity goes live in September. So what is the peak optimization capacity utilization that you are targeting? And the top line contribution from Hyderabad if you can just give a ballpark figure.
Vaibhav Jha
You are talking about rpec. So like I said, that arpect, you know, for us is a strategic investment to feed into the films business. Where we anticipate, you know, additional demand and ramp up in the additional demand for sustainable films. Right. So it’s a feedstock. So as such we are not looking at it as a profit generation investment on a standalone basis. Right. So it will feed into the films and the profits would be realized mainly in the film business from this.
Urmish Shah
Okay. Okay. So it will be on the control basis.
Vaibhav Jha
Yeah.
Pradeep Kumar Rustagi
Eventually, over a period of few quarters this will become an integral part of the film and will feed. Will. Will be used as a feedstock for making film with recycled content.
Urmish Shah
Okay. Okay. And any capacity realization. As you were saying, that capacity realization will improve going forward. So any optimum capacity utilization that you think would be ideal for.
Vaibhav Jha
For the film business or for the film. I mean the ideal capacity utilization is always 100%. Right. So our attempt will be to move towards that. And we are confident that in maybe two to three quarters we should reach that level. Or at least close to that level level. I think we are already doing 80% plus and keeping on improving it and go towards 100%. But it’s not far off.
Urmish Shah
Right. Okay. Okay, sir. Thank you. The results were good for this quarter and all the best for the future.
Vaibhav Jha
Thank you. Thank you.
operator
Thank you. The next question is from the line of Chandra from family office. Please go ahead. Mr. Chandra. Your line has been unmuted. Please go ahead with the question.
Chandra Shekhar Randev
My name is Chandra. My name is Chandra Shekharan.
operator
No, sir, it’s your turn to ask a question. Please go ahead.
Chandra Shekhar Randev
I got confused. I’m very sorry. Okay. I have a question. But you know, in the operational challenges and ramping up capacity at Hyderabad unit since it is consistently operating at low end capacity location as compared to Fatima plant. Right.
Sourabh Agarwal
We lost you.
Chandra Shekhar Randev
Sorry.
Sourabh Agarwal
You were not audible for a. For some time.
Chandra Shekhar Randev
No. Can you hear me now? Can you?
Sourabh Agarwal
Yeah.
Vaibhav Jha
Yes.
Chandra Shekhar Randev
Yeah. Are we facing any operational challenges in ramping up capacity at our Hyderabad unit Since it is consistently operating at lower capacity location as compared to Katima unit.
Pradeep Kumar Rustagi
So the Hyderabad plant was commissioned in January 23rd. So since it is a separate legal entity the many products are to be approved by the overseas customers. And since we have only one production line, the capability to produce value added products was also restrained. But we have been taking steps to increase the production of value added products. We are getting approval from the customers because it being a separate Legal entity. And over the last two three quarters there has been consistent improvement in the capacity utilization. So as we have told in the previous question, we are going to see consistent growth in the capacity utilization.
And very soon we should be in the range of 80 to 85% capacity utilization which will be then comparable to the Khadima capacity utilization.
Chandra Shekhar Randev
Now my second question is have we acquired the land for our new project in joint venture with the Loop?
Sourabh Agarwal
So for the land we are looking at multiple options as far as the land acquisition for the new project is concerned. And going forward in the next five to six months we should be able to have the position of land in our control.
Pradeep Kumar Rustagi
We are in very advanced discussions with the potential sellers. The process as such takes about four to six months to complete. So we have identified the piece of land, the seller has been identified. Almost all the column commercial terms have been negotiated. But the process itself will take about four to six months to complete.
Chandra Shekhar Randev
Will this delay the project?
Pradeep Kumar Rustagi
No, no. We are targeting commencement of commercial Production by quarter four of calendar 27. That’s, that’s there. And such a large project, the delay of a quarter is not something which is very significant.
Chandra Shekhar Randev
My last question is, do you foresee any drop in business with the new tariff announced by USA in our films and especially polymer business?
Vaibhav Jha
So like I said that our sales to us is quite resilient because we sell specialty films and polymers. So we don’t see much impact in terms of volumes over there.
Chandra Shekhar Randev
Yes sir, so nice of you. Thank you so much for explaining the situation. All the best for your latest result also. Keep going, keep going. Thank you so much.
Vaibhav Jha
Thank you.
operator
Thank you. The next question is from the line of Saket Kapoor from Kapoor and Co. Please go ahead.
Saket Kapoor
Yeah, I hope I’m audible.
Pradeep Kumar Rustagi
Yeah, yes you are audible.
Saket Kapoor
Thank you for this opportunity and thank you for a very detailed conversation. Firstly sir, if you could just repeat from the sake of replication also what is the global capacity addition and also the capacity addition in the country in the booklet segments for this financial year and for the coming one more financial year or calendar year.
Vaibhav Jha
See, in last financial year I think we had one small capacity coming up. When I say small in terms of the entire demand, there was only one line which came up. But we should also remember that you know, due to certain causes, much larger capacity went out of the Indian market because of the fire. So net, net in terms of the capacity, it’s almost similar to, or rather you know, the net addition is zero. In the next 12 months we expect another line to be added. Which would add, you know, another 40,000 tons of capacity in India per annum.
So that is about, you know, two and a half to 3% capacity addition. But the Indian demand is growing at a healthy rate of 9 to 10%. Right. So net net the operating rate of the Indian capacities should see increase in this financial year.
Pradeep Kumar Rustagi
So the pace of expansion which we witnessed two and a half or three years ago is not going to get repeated. The installation of or commissioning of new lines is going to be in a phase manner. And with the demand growing at more than 10% per annum, the industry will need about a line or two each year to be able to serve the growing demand of the, the country.
Saket Kapoor
Okay, what is the current demand supply ratio currently? How, what is the current demand? And, and how are the supplies screwed up? And if you could give the gap also.
Vaibhav Jha
Yeah, yeah. So right now the capacity is in the range of 1.35 million tons per annum per annum. And the domestic demand is in the range of 850 thousand to 9 lakh tonnes per annum. And India also exports close to 250,000 per year. So roughly 1.1 to 1.15 million tonnes of production is there. And total capacity is 1.35 million ton per annum. So roughly you can say that around 2 lakh to 250 lakh ton per annum is the surplus capacity. But let me also add that the capacity I talked about are the rated capacities. The actual capacity that is available for Production is usually 5%, at least 5% lower than the rated capacity.
Right. So the gap is even narrower if you look at the realistic production capacity.
Saket Kapoor
Only retreating two points. You mentioned that the spread for Q4 were in the range of 27 to 28 rupees for the commodity plane. And this is what we have posted for the first quarter also.
Vaibhav Jha
Yes, yes, yes.
Saket Kapoor
Okay. What have been the trend currently? I think so. You were also somebody was adhering to the fact that the prices moved up and then came back to what it was two months ago. So what are the current spreads for the month of July or, or any event date which you can share.
Vaibhav Jha
So right now I think we are operating at exactly the similar kind of range, you know, 27, 28 rupees.
Pradeep Kumar Rustagi
The impact of fire that was, that occurred in Jindal, it had more effect on the polypropylene film than on the polyester, because in polypropylene they were in dominant position. And the damage to capacity was much more severe in polypropylene than in polyester. So the industry did not Witness very major improvement in the prices because of the fire. So it’s been more or less stable. The margins have been more or less stable since the. Let’s say since the month of May or June.
Saket Kapoor
Earlier also we have expressed our intent to be more on the value added segment and also I think so correct me there 35% of the total sales we have targeted and the value addition. So where are we in that part?
Pradeep Kumar Rustagi
So actually what is happening if you look at the last year we ended it with 23% proportion coming from the value added products. But what has happened that the total sales have increased. Therefore the in terms of percentage it has moved from 23 to 24. But if you look at the volume growth in the VAS segment It is almost 37% as against 3,700 tons of VAS product in June 24th. Fourth quarter. This. This quarter we have done about 5,100. So there is a massive increase. But in terms of percentage of total volume it is increasing from 23 to 24 because of the larger base.
Saket Kapoor
Okay, and what are we envisioning that for this financial year to close with or an average in tonnage also or in potential because of the reasons mentioned by you.
Vaibhav Jha
Our target is that by the exit quarter which is the last quarter of this financial year we should be in an around 30 percentage share.
Saket Kapoor
The point of one more concern for investors are also being the finance cost especially for the Fintech, the plant in Telangana. And I think so. Dr. Vishav, you have articulated to us the three, four strategies that are currently in nine or if those get executed I think so they there will be greater generation of cash going ahead and hence this finance cost hitting the bottom line will also get reduced. This understanding is correct going ahead.
Sourabh Agarwal
So. So finance cost is a function of two things. One is the amount of debt that we have on the balance sheet as well as the requirement for working capital for the business. As we have elaborated. You know there is going to be significant growth in the turnover of Esther Primtech going forward and we are going to see a reasonable increase which is going to call for higher working capital. So as the amount of working capital increases you will appreciate that you know the requirement for working capital loans will also increase. So we don’t. So on an overall basis in absolute numbers we don’t see a significant drop in the finance cost going forward.
But yes, as a percentage of the total turnover it is definitely going to.
Pradeep Kumar Rustagi
Drop because we are also investing 50 crore in the new machine, the recycling extruder. So the Additional debt will result into some additional interest. But as Sourav said, as a percentage to the turnover we are going to see a drop in the interest cost.
Saket Kapoor
Right? Right. One more point, two points and then I joined the queue. So firstly if you could just give me the net debt numbers in rupee terms. What is the exact arbitrage we have to carry these euro loans? I think so. Current rate of interest and the availability of funds here domestically is very benign. So what is the cost arbitrage we have that we carry these euro loans for? We may have booked the loans at the time of inception of the plant for conceptualizing the same. But today do we have that significant arbitrage that we are carrying these euro loans and on the currency translation.
Sourabh Agarwal
So you know, the arbitrage has to be seen in relative terms, that is point number one. So while there has been a rate reduction in India by by almost 100 basis point in the last six to eight months, we should also understand that there has been a parallel rate reduction across. Right. So because of which the interest cost cost on our euro loan has also decreased from where we were in the past. Now the concern that you have, which is quite obvious is because of the mark to market which is there in the P L.
So that is a temporary phase and you know, as like for example as on 30 June our the rate for INR euro was 100, roughly touching 100. But we have the actual repayment that we did for the that quarter was at a much lower rate because we. Have done a hedging. So as a strategy a foreign currency loan definitely is at arbitrage compared to an Indian loan. The arbitrage can vary from 1.5% to maybe 2.5% depending upon the commercial understanding. As far as hedging is concerned we continue to monitor the market on a regular basis and we will ensure that, you know, as and when the right point comes we are able to hedge our exposure in euro again for the next six to 12 months because any long term hedge is very expensive at this point of time. So our strategy is to hedge for the next two installments which is basically 12 months as well as we have an interest benefit which is in line with whatever rate reduction has happened in India.
Saket Kapoor
Right. And thank you for the detailed discussion which we have. And also sir, I need to congratulate the team for listening to the investor request of handling board meeting much earlier. I hope this becomes a new normal for the company with the 40th year of existence and one more request and Sourabh sir, is that if we could also continue with the fresh release and the investor document submitted either along with the result or within few hours and not to be with a gap of 24 hours that gives a lag time and in a busy earning season we find it very difficult to get along with.
With so many results with a lack of presentation it is not serving the purpose for people I think. So if you get my point sir,
Pradeep Kumar Rustagi
point well taken. This time you would have received the investor presentation much earlier. But it was a chaos yesterday in good. So much of rain and so. So we were targeting to release the Investor presentation by 2pm yesterday. But because of the unprecedented rain we had this situation.
Saket Kapoor
Okay, not an issue sir. And this share of loss of joint venture, what is this attributed to? Of 20 lakh rupees for quarter the last two preceding quarters we have been booking.
Sourabh Agarwal
Basically as we have discussed we have entered to the joint venture with a Canada based company and we are setting up a project. And there was one question about the land acquisition there also. So we are incurring. So the company is already in place last year. We incorporated the company last year in July and it’s a 5050 joint venture between Este Industries and Loop Industries Canada. So as the project is progressing we are incurring some cost in terms of, you know, maintaining the company. Some employees are there. There are some regulatory compliances which we need to do.
So this loss of 20 lakh rupees is basically on that account.
Pradeep Kumar Rustagi
So Sakati, what happens in a new project everything is not capitalized as pre operative. So there are certain expenses which are not allowed by the accounting standard in force to be capitalized. They are to be charged to the profit and loss account. So something which is which will be capitalized as part of the preoperative will not hit the P and L. These are the expenses which are not allowed to be capitalized.
Saket Kapoor
Right? And last point on the specialty polymer have you guided given the current business sentiment taking into account what the current scenario is and our order booking in the same. Sir, going ahead, what’s the outlook looking like in terms of the tonnage part and also the realization trend like I.
Vaibhav Jha
Already mentioned earlier that what in the specialty polymer business we have very specialized products which have very high customer stickiness. And there is also the price and margin resilience. Right. So this is demonstrated by the fact that we have hardly made any margin compromise despite the tariffs increasing in us from 6% to 4% 15 and a half percent. And so we believe that the nature of product is such that in terms of tonnage we should not have any shortfall. Right. Because the customer also is wedded to us because of the technical nature of our products and it’s not easy to find a substitute product.
The second part of it is the margins and the revenue. So what we see is that again, you know, revenue is quite correlated with the volume so we don’t see an issue on the margin side. The tariff in us will have to be, you know, fully settled down before we can give you a very accurate assessment of what is going to happen. This will also require discussion with our customers and we will have to see case by case basis what we will do. And earlier I had given a full overview of our thought process on the US duty and how it is going to impact to us.
So I suggest that we will be in a better position to comment on this thing by the next investor meeting. By when the dust would have settled down and we would have had demonstrated results of how we see the margins panning out. But as such right now we don’t see a major movement in our margins. There could be some small movements but not a major one.
Pradeep Kumar Rustagi
Coming to the volume. Definitely no coming to the revenue. Last year we recorded a sales turnover of 158 crores in especially poly and in the first quarter we have done 48 crores. So you can draw your own conclusion from the trend.
Saket Kapoor
Right? Right sir. Thank you to the entire team. Sir, best of luck for the new project, the Loop one. And also we hope for good times ahead for the industry and all the best for the. We are in the 41st year now and the best is yet to come. We can wish for that. Thank you sir. My best wish. Thank you. Thank you.
operator
Thank you ladies and gentlemen. We’ll take that as the last question for the day. I now hand the conference over to Mr. Vaibhav Ja for closing comments.
Vaibhav Jha
All right, so I would like to thank all our stakeholders, partners and team members for their continued support and thank you all for participating in this call. We remain committed to driving sustainable growth, delivering value and building on the momentum achieved in this quarter. We look forward to an even stronger FY26. Thank you.
operator
Thank you on behalf of Estar Industries Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines. Sam.